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As many of you know, I was in San Francisco the week before last where I had been invited to speak at the MoneyShow, one of the biggest, most preeminent investor conferences in the world. Over the past couple of decades, I’ve spoken at many MoneyShows all around the country and have covered many different topics. Gold investing is one that often draws a big crowd. Not this year. Guess which natural resource stole the show?

The commodity that attracted attendees’ attention is one that until pretty recently could only be grown and harvested under the shroud of secrecy. Marijuana. Currently legal in 23 states and the District of Columbia, medical marijuana generated $2.7 billion in 2014 and is expected to bring in $3.4 billion this year. Investors are taking notice. The cash crop is even starting to change intranational migration. Whereas many retired seniors flock to warmer climates in which to live out their golden years, others now factor in whether a state will permit them to self-medicate in order to treat their arthritis, according to a recent Time article.

Investors themselves who might have suffered from arthritis attended the pot presentation at their own risk, as it was standing room only. They couldn’t have been pulled away even to sit comfortably in the scarcely occupied room next door. Sentiment toward gold was indeed very bearish at the MoneyShow, as it is around the world right now.

Gold Hits the Reset Button

Gold is universally recognized as a safe-haven investment, a go-to asset class when others look uncertain. Following the 2008 financial crisis, for instance, the metal’s price surged, eventually topping out at $1,900 per ounce in August 2011.

But last week proved to be a particularly rocky one for the metal, even with Greece and Puerto Rico’s debt dilemmas, not to mention the recent Shanghai stock market decline, fresh in investors’ minds. Gold traded down for 10 straight sessions to end the week at $1,099 per ounce, its lowest point in more than five years. Commodities in general dropped to a 13-year low.

The selloff was given a huge push when China, for the first time in six years, revealed the amount of gold its central bank holds. Although the number jumped nearly 60 percent since 2009 to 1,658 tonnes, markets were underwhelmed, as they had expected to see double the amount.

Then in the early hours last Monday, gold experienced a “mini flash-crash” after five tonnes appeared on the Asian market. Initially this might not sound like a lot, but five tonnes equates to 176,370 ounces, or about $2.7 billion. It also represents about a fifth of a normal day’s trading volume. Suffice it to say, price discovery was effectively disrupted. In a matter of seconds, gold fell 4 percent before bouncing back somewhat.

Reflecting on the trading session, widely-respected market analyst Keith Fitz-Gerald noted: “Far from being a one-day crash, this could represent one of the best gold-buying opportunities of the year.”

The last time the metal descended this quickly was 18 months ago, on January 6, 2014, when someone brought a massive gold sell order on the market before retracting it in a high-frequency trading tactic called “quote stuffing.” Last month I shared with you that we now know who might have been responsible for the action—and many others that preceded it—and pointed out that the accused party’s penalty of $200,000 was grossly inadequate. Last Monday I told Daniela Cambone during the Gold Game Film that such downward price manipulation seems to result in little more than a slap on the wrist. But if manipulation is done on the upside, traders could get into serious trouble.

Besides apparent price manipulation, other factors are affecting gold’s behavior right now, three in particular.

1. Strong U.S. Dollar

Like crude oil, gold around the world is priced in U.S. dollars. This means that when the greenback gains in strength, the yellow metal becomes more expensive for overseas buyers. With the U.S. economy on the mend after the recession, the dollar index remains steady at a 12-year high.

It’s important to recognize, though, that gold is still strong in other world currencies, including the Canadian dollar. As such, our precious metals funds have hedged Canadian dollar exposure for Canadian gold stocks, which has benefited our overall performance.

2. Interest Rates on the Rise?

Federal Reserve Chair Janet Yellen continues to hint that interest rates might be hiked sometime this year, perhaps even as early as September. When rates move higher, non-yielding assets such as gold often take a hit.

As you can see, the 10-year Treasury bond yield and gold have an inverse relationship. When the yield starts to rise, investors might find bonds a more attractive asset class.

3. Slowing Manufacturing Activity

Earlier this month I wrote about the downtrend in manufacturing activity across the globe. As many loyal readers are well aware, we closely monitor the global purchasing manager’s index (PMI) because, as our research has shown, when the one-month reading has fallen below the three-month moving average, select commodity prices have receded six months later.

China is the 800-pound commodity gorilla, and its own PMI has remained below the important 50 threshold for the last three months, indicating contraction. The preliminary flash PMI, released last Friday, shows that manufacturing has dipped to 48.2, a 15-month low. For gold and other commodities to recover, it’s crucial that China jumpstart its economy.

In the meantime, we’re encouraged by news that the slump in prices has accelerated retail demand in both China and India, which, when combined, account for half of the world’s gold consumption.

Battening Down the Hatches

They say that a smooth sea never made a skillful sailor. No one embodies this more than Ralph Aldis, portfolio manager of our precious metals funds. He and our talented team of analysts are doing a commendable job weathering this storm. We’re invested in strong, reliable companies, and when commodities eventually turn around, we should be in a good position to catch the wind.

We look forward to the second half of the year, when gold prices have historically seen a bump in anticipation of Diwali, which falls on November 11 this year, and the Chinese New Year. As you can see, average monthly gold performance has ramped up starting in September.

“Gold is down 15 to 25 percent below production levels,” Ralph says. “That might cause some companies to halt production.”

And, in so doing, help prices find firmer footing.

After my trip to San Francisco, an important rallying point for the 1960s counterculture movement, it only seems fitting that I traveled to Colorado, one of the first states to legalize cannabis for recreational use. It was only a coincidence that Julia Guth chose to retreat to the state’s beautiful mountains for the Oxford Club’s educational seminar. It was a privilege to present to two assemblies of curious investors like yourself. I enjoy meeting many of you when I’m on the road.

The Bloomberg Commodity Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Indexes. The index was originally launched in 1998 as the Dow Jones-AIG Commodity Index (DJ-AIGCI) and renamed to Dow Jones-UBS Commodity Index (DJ-UBSCI) in 2009, when UBS acquired the index from AIG. The Philadelphia Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver.

The J.P. Morgan Global Purchasing Manager’s Index is an indicator of the economic health of the global manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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While the media and investors are focused on Greece, Puerto Rico is having a debt meltdown of its own. The U.S. territory owes lenders over $70 billion, $5.4 billion of which is due in the next 12 months. But without some form of debt restructuring, says Governor Alejandro García Padilla, it will be unable to meet its obligations. Countless municipal bond fund investors—many of them unaware they have exposure to the Caribbean island—could be affected.

Year-to-date, Puerto Rican munis have lost 9 percent while U.S. munis have gained 0.4 percent.

Our Near-Term Tax Free Fund (NEARX) has no exposure to Puerto Rico. NEARX invests predominantly in high-quality munis, and our investment team prudently adjusted fund allocations when it became clear the commonwealth would face serious problems paying back bondholders.

The same can’t be said for many other funds in the U.S., however. Over 20 percent of American bond funds owns Puerto Rico’s bad debt, according to Morningstar. Sixteen of the 20 mutual funds with the highest ownership by percentage are run by a single investment management firm. The same firm owns nearly half of all Puerto Rican debt that’s owed by U.S. funds. Another firm offers a fund that has half of its investments in Puerto Rican bonds.

You might be wondering why these funds have invested so heavily in the island. Because they carry a “junk” rating, Puerto Rican bonds offer a higher yield than more conservative bonds. They also provide what’s called “triple tax exemption,” meaning they’re tax-free at the federal, state and local levels.

The tradeoff, of course, is that investor assume a greater deal of credit risk. That’s why it’s crucial for investors to be familiar with their funds’ holdings.

To Bail Out or Not to Bail Out?

On Monday, Governor Padilla asked Congress to grant Puerto Rico the ability to declare bankruptcy. The problem, though, is that like all U.S. states, the territory can’t file for Chapter 9 bankruptcy protection. That’s an option available only to municipalities and cities such as Detroit, whose own bankruptcy exactly two years ago was the largest in U.S. history by debt, estimated at between $18 and $20 billion.

Whether to bail out the commonwealth is currently being debated. Some officials believe Puerto Rico is “too big to fail.” Others argue that its leaders haven’t done enough to reverse years of economic slowdown. Forty-six percent of all native-born Puerto Ricans who moved to the U.S. mainland between 2006 and 2013 did so for job-related reasons, according to the Pew Research Center.

“Puerto Rico is a beautiful island with a rich culture, but currently its government isn’t doing enough to encourage young professionals to stay,” says Kat, USGI’s web designer, who moved from Puerto Rico to San Antonio in 2007. “The cost of living keeps going higher while wages haven’t improved. I don’t know what needs to be done, but raising the sales tax and doing nothing to prevent talent from leaving the island aren’t the answer.”

Highly-Rated Municipal Bonds Remained a Relatively Safe Asset Class

Just as investors should know what assets they own, it’s important for them to realize that Chapter 9 filings—at least among highly-rated municipalities—have been the exception, not the norm. According to ratings agency Moody’s, Baa-rated munis historically had similar default rates as Aaa-rated corporate bonds.

Again, NEARX invests in quality, short-term munis. Having provided investors with over 20 straight years of positive returns, the fund holds five stars overall from Morningstar, among 184 Municipal National Short-Term funds as of 6/30/2015, based on risk-adjusted return.

Let’s hope our friends to the south can reach a solution to the debt crisis.

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Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Total Annualized Returns as of 6/30/2015

Fund

Year to Date

Five-Year

Ten-Year

Gross Expense Ratio

Expense Cap

Near-Term Tax Free Fund

0.90%

2.27%

2.98%

1.08%

0.45%

Expense ratio as stated in the most recent prospectus.The expense cap is a contractual limit through April 30, 2016, for the Near-Term Tax Free Fund, on total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest).Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

Overall/184

3-Year/184

5-Year/160

10-Year/110

Morningstar ratings based on risk-adjusted return and number of funds
Category: Municipal National Short-Term funds
Through: 6/30/2015

Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

The S&P Municipal Bond Index is a broad, market value-weighted index that seeks to measure the performance of the U.S. municipal bond market. The S&P Municipal Bond Puerto Rico Index is a broad, market value-weighted index that seeks to measure the performance of bonds issued within Puerto Rico.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

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Joanna Sawicka still remembers having to wait in line for hours to buy food and school supplies. In communist-controlled Poland, such basic goods were rationed. Families received special government-issued cards that permitted them to buy only the minimal amount of meat per month. This experience made a lasting impression on Joanna as a child and inspired her to work toward a life in which she would not want for anything.

Now the research analyst for our Emerging Europe Fund (EUROX), Joanna recently visited her native Poland and found it to be a drastically different country from the one she grew up in. I sat down with her to chat about her travels and where she thought the Eastern European country might be headed from here.

So tell me about your trip.
Basically it was a family trip. I got to spend time with my parents and some old friends, not to mention check out how Poland looks now and see the changes that have happened since I last visited nine years ago.

I combined the trip with a short two-day visit to Warsaw, where I attended the Capital Markets Summit at the Warsaw Stock Exchange. The main topics of discussion during the conference included real estate and the growing role of debt capital markets. We also discussed the continued effort to privatize Polish businesses, a process that began in 1991 after the fall of communism.

What’s changed since your last visit?
I saw big changes. There’s now a small business on every street corner. A lot of my old friends own businesses now. Poland is the largest beneficiary of European Union funds, and people are clearly taking advantage of having more money and better opportunities.

Another change I saw were the highways and roads being developed. They’re so much bigger and better from when I was a child. The highway from Warsaw to Bialystok, where I was born, used to be one lane each way. Now it’s being developed into two lanes each way, so it will be faster, better-looking and more convenient. The cars are also better now than what I remember. The Fiats and Polonezes have been replaced with Mercedes and BMWs.

On the other hand, electronics and clothing have become very expensive. While I was over there, I priced the iPad for my daughter and was surprised to find that it was quite a bit more expensive than here in the U.S. I was also able to visit CCC, one of the holdings in the Emerging Europe Fund. It’s a retail shoe and handbag store that looks a little like Payless ShoeSource, but it’s bigger and nicer. It’s being managed very cost-efficiently because they have few people working there.

What advice do you have for someone who’s interested in investing in Poland?
As always, if you’re investing in another country, you need to be careful with currencies. As for Poland in particular, be selective. There are many good opportunities, but it’s important to be familiar with the company’s story as well as the people managing it. Right now, political risk is a concern, and the financial sector is under some pressure. The populist Law and Justice Party seeks to increase taxes on banks and opposes the domestic ownership of lenders.

What do you see in store for Poland?
I see Poland moving forward quickly and with confidence. When I was little, the neighborhood grocery store carried next to nothing other than milk and bread. For meat, you had to wait in a line for a couple of hours. Today, I can go to the same store and easily find anything that’s available here in the U.S. In fact, Polish stores carry an even wider selection of produce and other goods than what Americans might be used to.

In that respect, the Poland of today reminds me of America. It has so many new opportunities, and people’s lives have vastly improved since the end of communism. Investment dollars are coming in from abroad, and many people have taken the opportunity to open up their own businesses. It’s still more challenging to open a business in Poland than in the U.S., though. There’s so much bureaucracy, and the paperwork takes a lot of time to complete. You have to know the right people. Although there is room for further improvement, I’m very proud of Poland and its people.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as of 6/30/2015: CCC SA 0.80%, Fiat Chrysler Automobiles N.V. 0.00%, Bayerische Motoren Werke AG 1.03%.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Can we really be halfway through the year? That’s what my calendar tells me, which means it’s time for the 2015 commodities halftime report.

The periodic table of commodity returns, consistently one of our most popular pieces, has been updated to reflect the first half of 2015. Click on the table for a larger image. If you’d prefer your own copy of the original, simply email us.

As an asset class, commodities continue to be a challenging space for investors, as they’ve faced many headwinds lately including lackluster purchasing managers’ index (PMI) numbers and a strong U.S. dollar.

Crude Pulls off Coup but Faces Strong Downward Pressure

The widest expansion this year was made by none other than crude oil, the worst-performing commodity of 2014. As of June 30, oil posted gains of over 11 percent, rising to $59.47 per barrel. After falling more than 50 percent since last summer, though, it had little else to go but up. That oil claimed the top spot just highlights the reality that commodities are in a slump right now.

Case in point: This week, West Texas Intermediate (WTI) retreated to $50 per barrel, putting it back in the red for the year. This move was largely in response to Greece’s debt dilemma, China’s slowdown and weakening PMI numbers. After the JPMorgan Global Manufacturing & Services PMI was released, showing a continued downtrend in manufacturing activity, oil almost immediately dropped $4. The lifting of sanctions on Iran, if approved by Congress, could also place downward pressure on WTI, with some analysts seeing it returning to the $40s range.

As the 800-pound commodity gorilla, China greatly contributes to the performance of oil. Its own PMI reading remains below the key 50 threshold, indicating that its manufacturing sector is in contraction mode. This has a huge effect on the consumption of oil and other important commodities.

The good news is that the projected crude price for the remainder of 2015 should be high enough to support continued production in drilling areas such as the Bakken, Eagle Ford and Permian basins, according to the Energy Information Administration (EIA). The oil rig count, as reported by Baker Hughes, has advanced for the third consecutive week, after 29 straight weeks of declines.

King Corn Pops to the Top

We all know that corn is in practically everything we eat and drink, from soda to bread to salad dressing. It’s fed to livestock and poultry and used to make ethanol, plastic, glue and more. The grain is so ingrained in our lives that the U.S. government subsidizes it to the tune of $4.5 billion a year.

For this reason and more, American farmers favor corn. In 2013, a record amount of it was grown and sent to market, which resulted in a price decline of 40 percent. That year it was the worst-performing commodity.

Since then, corn has found its footing and, as of June 30, returned 4.28 percent.

Zinc Is Flying off Car Lots

Sought for its anti-corrosive properties, zinc is staging a comeback and is set to make its longest run of gains in over a year, according to Mineweb.

The reason? Accelerating automobile sales in Europe. Zinc can be found in most car parts, from tires to door handles, and because it can store six times more energy per pound than more conventional battery systems, the metal is also used in electric vehicles.

The European Automobile Manufacturers Association reports that demand for new vehicles is up 14 percent year-over-year in June, its largest increase since December 2009. New car registrations in most European markets are seeing double-digit growth, with Portugal, Spain, Ireland and the Czech Republic leading the pack.

Gold Demand in China Sparkles

In a much-anticipated announcement, China broke its six-year silence on the amount of gold its central bank holds. And although the number jumped nearly 60 percent from 1,054 tonnes in 2009 to 1,658 tonnes, it underwhelmed the market, as many analysts had expected almost double the amount. Bullion fell to a fresh five-year low on Friday, while stock in Barrick Gold, the world’s largest producer, plunged to a level not seen since the Bush Administration—the elder Bush, that is.

But other news out of China, the largest purchaser of gold, suggests that the yellow metal is still very much on consumers’ minds. Just-released gold withdrawal numbers from the Shanghai Gold Exchange (SGE) came in at 1,180 tonnes—a huge amount—setting a new record for withdrawals in the first half period and leading many analysts to predict a new annual record.

Gold demand in China normally cools around this time before picking up momentum in anticipation of the Chinese New Year. That demand has held up so well is a good sign for the second half of the year.

Even though gold’s down about 3 percent year-to-date, our Gold and Precious Metals Fund (USERX) is holding up. USERX currently has four stars overall from Morningstar, among 71 Equity Precious Metals funds as of 6/30/2015, based on risk-adjusted returns. This is a testament to the management skills of portfolio manager Ralph Aldis and our team of analysts. Check out Ralph’s MoneyShow interview, where he chats about some of his favorite gold companies.

The MoneyShow San Francisco

Last week I was in San Francisco attending the three-day MoneyShow conference, where I presented. If you weren’t able to make it, you can watch the presentation on-demand on your computer, tablet or smartphone by registering at eMoneyShow. The event will be available on-demand until August 8.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Total Annualized Returns as of 6/30/2015

Fund

Year to Date

One-Year

Five-Year

Ten-Year

Gross Expense Ratio

Expense Cap

Gold and Precious Metals Fund

6.40%

-28.42%

-15.80%

1.62%

1.97%

1.90%

Expense ratios as stated in the most recent prospectus. The expense cap is a voluntary limit on total fund operating expenses (exclusive of any acquired fund fees and expenses, performance fees, extraordinary expenses, taxes, brokerage commissions and interest) that U.S. Global Investors, Inc. can modify or terminate at any time, which may lower a fund’s yield or return. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

Overall/71

3-Year/71

5-Year/68

10-Year/51

Morningstar ratings based on risk-adjusted return and number of funds
Category: Equity Precious Metals
Through: 6/30/2015

Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

The S&P GSCI Spot index tracks the price of the nearby futures contracts for a basket of commodities.

The J.P. Morgan Global Purchasing Manager’s Index is an indicator of the economic health of the global manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Gold and Precious Metals Fund as a percentage of net assets as of 6/30/2015: Baker Hughes Inc. 0.00%, Barrick Gold Corp. 0.03%.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

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The sheer size and importance of China’s equity markets cannot be overstated. Second in size only to the New York Stock Exchange, the combined value of the Asian country’s stock markets, according to the Wall Street Journal, is $14 trillion and change. Or at least it was in May, a month before markets fell more than 30 percent. The Shanghai Composite Index alone gave up $2 trillion in value. To put this in perspective, the gross domestic product (GDP) of debt-troubled Greece is around $200 billion.

So how did this happen? The answer has a lot to do with the quantity and quality of investors.

In most major economies, stock markets trading is dominated by professional money managers. But in China, between 80 and 90 percent of the domestic A-share market is made up of retail investors, many of them novices who sought to participate in the yearlong bull run. An eye-popping 40 million new brokerage accounts were created in the one-year period ended in May. The Communist Party, by comparison, gained only a little over one million new members in the same period. At the peak, accounts were being added at a rate of over three million per week.

For many of these first-time or relatively inexperienced investors, the price of entry was margin lending. Cosmic amounts of it. Near the end of June, 2.08 trillion yuan ($335 billion) worth of borrowed funds flooded the Shanghai and Shenzhen markets. Margin lending as a percentage of total market cap rose to as high as 20 percent. In the U.S., it’s about 2.5 percent.

This combination—millions of new accounts mixed with unprecedented leveraging—greatly contributed to the selloff. As you can see above, this leverage is now unraveling as investors are forced to sell in order to meet margin calls.

Beijing has responded with a host of measures to prevent the market from sliding any further, one of the most significant being a ban on huge institutional shareholders from selling until the Shanghai Composite rises above 4500. As of this writing, it’s just above 3800 after breaking a three-day rally.

The good news is that some analysts believe the worst might be behind us. Financial services firm UBS takes the position that, as massive as the correction was, it shouldn’t have a “major” economic impact.

In the meantime, we have raised the cash level in our China Region Fund (USCOX) and are ready to deploy it when the right opportunity arises.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange. The CSI 300 is a capitalization-weighted stock market index designed to replicate the performance of 300 A-share stocks traded in the Shanghai and Shenzhen stock exchanges.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Please consider carefully a fund's investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by clicking here or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

With respect to the Fidelity Institutional Money Market Treasury Portfolio, which is distributed by Fidelity Distributors Corporation, an investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

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Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. The tax free funds may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.

The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

Morningstar Ratings are based on risk-adjusted return. The Overall Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating? based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

Each of the mutual funds or services referred to in the U.S. Global Investors, Inc. website may be offered only to persons in the United States. This website should not be considered a solicitation or offering of any investment product or service to investors residing outside the United States.

Certain materials on the site may contain dated information. The information provided was current at the time of publication. For current information regarding any of the funds mentioned in such materials, please visit the fund performance page.

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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.